11 things to know about South Bay Expressway

The South Bay Expressway opened in November 2007 as an innovative public-private venture -- a toll road financed, built and operated by a private company but owned by the state. The promise quickly faded as recession hit, the projected traffic barely arrived and a flood of costly litigation threatened to sink the venture.

A year ago the operator of the 10-mile toll road filed for bankruptcy, from which it successfully emerged on Thursday. Waiting for them was an offer to buy the the South Bay Expressway franchise, made by the regional planning agency San Diego Association of Governments (SANDAG). It may not be the only offer but apparently it is the first and the situation raises many questions. Here are some answers.

Why does SANDAG want to buy a bankrupt highway?

It’s not bankrupt any more. Gary Gallegos, executive director of SANDAG says the road has great strategic value. Its 26,000 vehicles a day, Monday through Friday, don’t nearly tap the capacity of the highway and they are enough to cover current operating costs. South Bay is also poised for explosive growth. A university is planned nearby. New housing starts are coming back. Commercial truck traffic is about to reopen the border with a vengeance. A third port of entry is in development just east of the toll road. A pedestrian access facility to Tijuana’s international airport is in development.

All of this means traffic for the toll road.

How would SANDAG pay for it?

There are numerous financial weapons in the SANDAG arsenal. One of the biggest is the half-cent sales tax for transportation which pours millions of dollars every year into the TransNet fund managed by SANDAG. The tax will be collected until 2048. There is access to federal funds and bonds and loans. And, of course, from toll revenues.

“It would be SANDAG’s money,” said Chula Vista Mayor Cheryl Cox, a member of the SANDAG board of directors. “SANDAG is using its substantial reserves to be able to process this.”

Would buying the toll road take money from other projects?

Nobody knows yet. What is known is that there are no new highways to be built in the county in the next 40 years. Should a deal be struck it will be subject to a public hearing.

How can you buy a highway?

In this case, nobody is buying the highway. That is already owned by the State of California. Any purchaser would be buying the operating lease, that is, the right to operate the road and collect tolls for the balance of the contract -- which is about 31.5 years.

So, what’s that worth?

That was mutually agreed upon by all parties in bankruptcy court: $287 million – which is a million dollars less than its current debt. South Bay CEO Greg Hulsizer said that the road currently meets all its operating expenses and generates a surplus.

What happens next?

On April 29, South Bay Expressway LP will be no more and a new company, South Bay Expressway LLC, made up of its creditors, will take ownership. These are the banks and other investors who financed the construction of the South Bay Expressway. Through bankruptcy litigation, their claims were reduced from $535 million to $288 million and more than $600 million in other claims were wiped out. Any negotiations will be with representatives of the new owners.